FINANCIAL REPORTING AND PERFORMANCE MEASUREMENT

Financial accounting is concerned with the preparation and public dissemination of financial reports designed to reflect corporate performance and financial condition. By providing timely, relevant, and reliable information, these reports facilitate the decision-making of investors, creditors, and other interested parties. Financial markets depend on the information contained in these reports to evaluate executives, estimate future stock returns, assess firms’ riskiness, and allocate society’s resources to their most productive uses. The purpose of this course is to introduce you to the concepts of financial accounting and its underlying assumptions. We will discuss the uses and limitations of the financial statements. Procedural aspects of accounting will be discussed in order to enhance your understanding of the content of the financial statements. However, the emphasis of the class is on using accounting information in the evaluation of business performance and risk.

The course is designed to provide students with conceptual background and analytical tools necessary to evaluate financial statements issued by private and public companies. It focuses on understanding the uses and the limitation of both the financial statements and the traditional and non-traditional methods used in analysing them. We will discuss the financial statements, the different effects of alternative accounting principles on reported performance, and the interpretation of financial information. The course consists of lectures, working and analysing case studies, and class discussions. Every participant of the course is supposed to contribute actively to an interactive dialogue and a positive learning environment. Students will be able to make judgements about the firm’s financial position, analyse cash flows and earnings quality, and assess the overall performance of a firm.

There are no prerequisites for the class.

The course is designed to provide students with the background and tools that will enable them to read, interpret, and understand financial statements. Furthermore, students will be able to evaluate the financial health and performance of public firms based on their financial statements.

The text for the course is Financial Accounting, 10th Edition, by Libby, Libby and Hodge published by McGraw-Hill Education, 2020. The book is available through the LUISS Library.

Lectures: Classes will be held online and on campus. The lectures will be hybrid, containing theoretical material and practical issues. Students may be required to work in groups of students to solve questions during class. Preparation for classes: To prepare for class, please read the assigned chapters and do the assigned practice exercises and problems listed on the Class Schedule. While the practice exercises and problems will not be collected or graded, please complete them. You are responsible for knowing the information covered in the exercises and problems. Solutions to all assigned problems will be provided on LUISS Learn. Please do not rely on the solutions to do the problems. Use them to check your answers after you have attempted to solve the problems. The assigned practice problems may be discussed in class.

Attendance: All students are considered “Attending”. If you qualify for an exemption from attendance, please communicate this to me via email no later than ONE WEEK AFTER CLASSES START Case assignments: The course will have 3 case assignments. These assignments focus on various companies’ financial statements. They will be available on the course website. These are due before the class meeting date shown on the Class Schedule. The assignments are to be done and submitted individually. A dropbox will be provided to submit your case, one submission per pair of students is sufficient. Solutions to the assignments should be typed and submitted electronically. The case assignments will be graded on a scale of 1 to 10. Each assignment will be worth 10% of your final course grade. Quizzes and Final Exam: The quizzes and final exam will be held on the dates indicated on the Class Schedule. You will be taking them on your laptop in class and submit them on the LUISS Learn platform. There are two cumulative (in terms of material) quizzes and one final exam (which covers the entire course). Makeup quizzes will not be given for any reason. If you miss a quiz, the points allocated to the quiz will be shifted to the final exam. The quizzes and exam will consist of a set of financial statements of a publicly traded company along with questions on said statements. The questions cover the material covered in class up to that point and may include material from prior quizzes. Make sure to write out your calculation, a wrong answer along with calculations may receive a partial score while a wrong answer without a calculation will receive 0. If a student under-performs in one of the quizzes, I may use my discretion to allocate the weight of said quiz to the other quiz and final exam. Quiz 1 is worth 15% of your final grade Quiz 2 is worth 20% of your final grade Final Exam is worth 30% of your final grade Class participation: Students are expected to review the required material before class and to participate in the class. Students are encouraged to ask questions during class and will be given the chance to answer questions. Participation is not limited to providing the correct answers and students should not fear making mistakes in class. Class participation is worth 5% of your final grade.

Towards the end of the course, time permitting, we will examine Environmental Social and Governance disclosures of public firms.